Now that we have all had some time to digest the news that Microsoft is buying Activision Blizzard Its time to break down some the details. The first thing that jumped out at me from the press release was the news that Xbox game pass has 25million subscribers. I don’t think this number has been officially acknowledged before and it shows you the size of the Microsoft gaming operation. If, as rumoured, PlayStation has a rival service planned for this year they have a long way to go and that is only made harder with this acquisition. The value proposition for Xbox Game Pass gets stronger with each acquisition and there becomes an inevitability or momentum behind Microsoft success in this space. With this acquisition Microsoft is attempting to position itself for as the front runner in cloud gaming content and the Metaverse!

Although we shouldn’t be fooled in to thinking that for Microsoft to win Sony must lose. There is a huge gaming pie available which is only getting bigger as more of the world’s population get turned on to both the internet and gaming for their leisure activities.

So why make this deal?

This deal is all about Money and Content. Let’s break those two things down. Starting with a look at some headline figures from Activision and their biggest IPs which I think illustrate why Microsoft is doing this.

Money

Below we can see revenue from Activision between 2005 – 2021. There are vast numbers involved here with steady growth. Most pleasing for Microsoft is the proportion which comes from In-game revenue which shows excellent engagement from Activision’s customers and a natural fit with Microsoft’s own strategy of not relying on hardware sales for profit generation.

Let’s also look at revenue from the tentpole franchise under the Activision banner Call of Duty. Whilst it may be true that Call of Dutys heyday may be over the numbers it generates are impressive for any mass entertainment franchise. Hollywood can only dream of numbers and longevity like this for its franchises and this is a good signal as to why companies like Netflix are getting into gaming.

Content

Call of Duty, Warcraft, Candy Crush, Overwatch, and Diablo. All of these games will now come to Game Pass making the value proposition for that service that much greater. And even if some of those games remain on PlayStation they will be marketed as best played on Xbox, for free with your Game Pass subscription. Remember that with Gamepass Microsoft can see to all users everywhere, if they have a device such as an iPhone, Ipad or web capable laptop, and not just those gamers with an Xbox console.

Impact

What impact will this have on the games industry as a whole? It’s hard to say what any individual deal will have but we can see an overall trend towards consolidation with both Microsoft and Sony buy up game studios and publishers in recent years.

This is good for the owners of those businesses but if it leads to lack of choice for the consumer, we may look back on the days of a fractured games industry, with hundreds of independent developers struggling to get published as the good old days!

This is good for the owners of those businesses but if it leads to lack of choice for the consumer, we may look back on the days of a fractured games industry, with hundreds of independent developers struggling to get published as the good old days! The lack of choice doesn’t just relate to where you buy your games but which games you can buy, and how you buy them. It certain that Microsoft views the future of gaming as streaming, and this deal brings us closer than ever to that, but what does that mean for gamers who want to own the games they play and play them on hardware they own. They face an uncertain future.

What does this to do to PlayStation – if anything! PlayStation are certain to announce their version of Xbox game pass this year and selling that product as something with a high value proposition just got harder if the public’s perception is that every game is on Xbox. One thing is for sure is that the best industries are the ones where competition is high, driving innovation and competing for consumers hard earned money, and therefore keeping prices reasonable. Gamers, even die-hard Xbox fans, need Sony to succeed to keep Microsoft honest!

Will Call of Duty remain on PlayStation – As we saw earlier revenue through microtransactions are so massive that Call of Duty will surely remain on the Sony platform in some guise. The free to play, massive battle royale will stay on PlayStation with the premier experience version, in the form of campaign and new gameplay becoming Xbox exclusive. The narrative will be that COD is available everywhere, but its best played on Xbox.

Two last thoughts to finish on.

Is this good for you the consumer? – If you are an Xbox fan then this news is fantastic. Some massive franchises are coming to Game Pass with many set to become Xbox / Microsoft exclusive, which only enhances the value proposition of the product you bought and validates your choice to buy into the Xbox eco system. Sadly, we seem to be heading towards a future where 2 or 3 mega corporations own the gaming platforms and the companies which develop and publish them.

But we as gamers will be best served with a diverse games industry competing against each other to make the best, most innovative games they can.

If you are a gamer now what is the optimum set up? Is it now PC + PlayStation as we assume that most games will now be on PC also? Assuming most new Xbox titles will also be PC titles where shouldn’t we all run out and buy PlayStation? For anything that isn’t on PC we can stream over Xbox Game Pass Ultimate. Then again if Sony’s rival service launches this year, then the opposite is also true.

What an interesting time to be a gamer!